Banks, Credit Unions Highlight Harm APR Cap Legislation Would Have on Consumers

WASHINGTON, D.C. – Seven leading financial groups that represent banks and credit unions of all sizes today sent a letter to Senators Bernie Sanders (I-Vt.) and Josh Hawley (R-Mo.) to oppose their proposed legislation that would create an annual percentage rate (APR) cap for credit cards at 10 percent. This measure would severely restrict the availability of this type of credit for everyday consumers.

As outlined in the letter, Sens. Sanders and Hawley’s proposal would harm the very people the legislation seeks to protect:

“Many consumers who currently rely on credit cards would be forced to turn elsewhere for short-term financing needs, including pawn shops, auto title lenders, or worse – such as loan sharks, unregulated online lenders, and the black market.”

Research is clear that rate caps worsen consumers’ financial health, which has ripple effects on the economy:

“Other research demonstrates that when consumers lose access to credit, they often reduce spending on essentials such as healthcare, education, and food, and are more likely to fall behind on bill, mortgage, and rent payments. Lack of a credit card would also likely reduce their consumption of items like furniture and clothing which not only negatively affects consumers, but also negatively affects the broader economy.” 

Finally, the letter highlights financial institutions goals to help consumers:

“As responsible and well-regulated financial institutions, we share the goals of reducing the cost of consumer credit and increasing financial inclusion. Unfortunately, the 10 percent rate cap proposed in this legislation would stifle our shared financial inclusion goals, reduce access to credit, and push consumers to far more costly and less regulated lenders.”

To read the full letter, click HERE.